Ever since 1991 when Dr. Manmohan Singh became Finance Minister, there were sharp debates on economic policy. This was heightened by the fact that a year later, Dr. Manmohan Singh was the main author of "The Challenge to the South," Report of the South Commission. This report was a scathing attack on neoliberal policies and the economies of the poorer countries. Dr. Manmohan Singh claimed it was a collective work, not mainly his own. But the more interesting point is that a number of warnings of the7 report are coming true. A weak currency is likely under these "reforms." This is what is happening now. The rupee fell to a new low of 61.21 raising the spectre of high inflation threatening the stability of government finances. The rupee has depreciated almost 13% against the dollar since May and is the worst performing currency in Asia. Further impacts on the economy seem likely. In the short term all Indians are likely to be hit, including those in electronics and automobiles, as hiked crisis will lead to higher input costs. General prices are likely to rise if the government chooses to pass on the cost of higher oil imports to customers. Fuel costs like those for cooking gas and diesel are likely to increase by at least Rs.1 every month to reduce their losses following the steep rupee depreciation. The diesel hikes will further lead to enhanced inflation because of increased transport costs in trucks, trains. When the debate started on "reforms" there was euphoria among business, bureaucratic, political and media circles. It would appear that the purveyors of neoliberal dreams have failed.
Posted on: Tue, 09 Jul 2013 08:18:45 +0000
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